India’s ONGC warchest bleeding cash

MUMBAI: India’s Oil and Natural Gas Corp (ONGC), which once had US$4.3bil of funds, is now bleeding cash.

The state-run company’s cash reserves have shrunk by more than 90% in the past year, after it was ordered to purchase the administration’s stake in a refiner and it paid a record dividend.

ONGC’s reserves dropped to about 10 billion rupees (US$148mil) as on March 31 from nearly 130 billion rupees a year earlier, according to data complied by Bloomberg.

ONGC’s largest shareholder, Prime Minister Narendra Modi’s government, has been tapping state-run companies including India’s biggest energy explorer to bridge its fiscal deficit.

That’s left the company with depleting cash at a time when it has been ordered to boost investment to help cut the nation’s crude imports. ONGC paid 426 billion rupees last fiscal year as dividend to the government and to buy its stake in the refiner.

“ONGC is heavily leveraged now,” Aloke Kumar Banerjee, the company’s former finance head, said in an interview. “It’s important for exploration companies to have sizable cash balance as buffer. It’s a highrisk business.”

The energy explorer’s shares have fallen 17% from a January high. They dropped as much as 0.6%, while the benchmark S&P BSE Sensex gained 0.4%. The company’s spokesman declined to comment on its falling cash levels.

ONGC aims to spend 860 billion rupees on 31 big projects to boost oil and gas production, according to its website. The company has started work on its largest-ever exploration project that would require investments of more than US$5bil over about four years. Earlier this year, ONGC sold debt for the first time to pay for the 369.2 billion rupee acquisition of the government’s holding in refiner Hindustan Petroleum Corp. — Bloomberg